Market News & Analysis
Global growth worries continue to influence crude oil
Crude oil prices took a heavy hit overnight as supply worries driven by on-going trade tensions drove straight into buyer confidence sending the price of crude oil close to 3% lower. China continues as the primary front but Europe is developing as a new point of worry. President Trump has stated several tariff treats to the EU.
Global growth worries have a direct correlation to the crude oil supply outlook. Lower or projected lower global growth can have a negative impact on crude oil demand as economies require less due to substandard economic conditions. Over the year this factor has been a key driver in the price of oil. It has overshadowed OPEC output cuts, cuts that have now been extended to March 2020. Open and its allies including Russia have agreed to extend supply cuts as members overcame differences to try to prop up prices.
“There seems to be some disappointment that OPEC didn’t make a larger production cut. Or a sense that demand is really bad,” said Phil Flynn, an analyst at Price Futures Group in Chicago.
Signs of a global slowdown could hurt oil demand, which could cause OPEC and it’s allies headaches when trying to hold up oil prices.
“It was the bare minimum OPEC could agree on in order to prevent a major meltdown in prices. Member countries noted that global oil demand growth for this year has fallen to 1.14 mbpd (million barrels per day) whilst non-OPEC supply is expected to grow by 2.14 mbpd,” PVM analyst Tamas Varga wrote in a note.
Looking at the daily chart below we can see last nights decline lined up with the downtrend line starting a new leg lower. Traders could look for a new LH to confirm this is a new leg lower as buyers did break the last downtrend on the 18th of June. That break could be kept in mind as this latest move could end up being the first reaction of a new uptrend. We will find out a lot on how the next rally plays out. Currently, price is trading 17 cents higher in today’s session.
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Sources – CNBC – All times AEST
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